Gold book forecast changes for the Lower Medium, Sports, and Supercar sectors

Customers who take our gold book residual value forecasting product, will see new forecasts in September for the Lower Medium, Sports, and Supercar sectors. These forecasts will be based on revised future market deflation assumptions for these sectors.

These sector reviews are the fourth of a 5 month cycle in which we will revise our sector and fuel type future market deflation assumptions, based on our latest forecasts for new car registration volumes, the latest UK economic forecasts, and our expectations for the future market dynamics of different fuel types. Collectively these will determine the balance of used car supply and demand, which drives future market deflation/inflation.

In the Lower Medium sector we consider that over the next five years, overall registration volumes will continue to decline, but with the rate of decline reducing in the outer years. There will continue to be a shift from diesel into petrol. Diesel used supply will reduce in future years, to broadly balance reduced used diesel demand. Conversely, petrol used supply will increase in future years to broadly balance increased used petrol demand. Overall, the balance of supply and demand will tip in favour of less deflation. The resulting changes in our deflation assumptions at 36/60k are as follows:

Lower Medium Diesel: +3.5% improvement (less deflation)

Lower Medium Petrol: +3.1% improvement (less deflation)

It should be noted that after these changes, diesel deflation will remain worse than petrol deflation in the Lower Medium sector (-2.2% worse at 36/60k).

In the Sports sector we consider that over the next five years, there will also be reducing overall registration volumes, but with a greater relative decline in diesel registrations. Future used demand will grow for petrol models but decline for diesel models; and this change in demand will outweigh the change in supply. The resulting changes in our deflation assumptions at 36/60k are as follows:

Sports Diesel: -4.0% deterioration (more deflation)

Sports Petrol: +3.0% improvement (less deflation)

The Supercar sector will remain low volume, and we expect the trend seen in recent years of deflation being less than we originally expected, will continue. The change in our deflation assumptions at 36/60k is as follows:

Supercar Petrol: +3.0% improvement (less deflation)

Fuller details of these deflation assumption changes, and the overall impact of the sector reviews on our forecasts, will be available in our September gold book editorial.